Good day, ladies and gentlemen. And thank you for your patience. You joined Zions Bancorporation's Fourth Quarter 2017 Earnings Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time [Operator Instructions]. As a reminder, this conference maybe recorded. I would now like to turn the call over to your host, Director of Investor Relations, Mr. James Abbott. Sir, you may begin.

Thanks Latif, appreciate it. And I would clarify that the conference call is being recorded. And good evening to all of you. We welcome you to this conference call to discuss our 2017 fourth quarter earnings. For our agenda today, Harris Simmons, Chairman and Chief Executive Officer, will provide brief overview of key strategic and financial objectives. After which Paul Burdiss, our Chief Financial Officer, will provide an update on Zions' financial condition, wrapping up with our financial outlook for the next four quarters. Additional executives with us in the room today include Scott McLean, President and Chief Operating Officer; Ed Schreiber, Chief Risk Officer; and other Zions executives who are available to address your questions during the question-and-answer session. I would like to remind you that during this call, we will be making forward-looking statements, although, actual results may differ materially. We encourage you to review the disclaimer in the press release or the slide deck dealing with forward-looking information, which applies equally to statements made during this call. A copy of the full earnings release, as well as a supplemental slide deck, are available at zionsbancorporation.com. We will be referring to the slides during this call. The earnings release, the related slide presentation and this earnings call, contain several references to non-GAAP measures, including pre-provision net revenue and the efficiency ratio, which are common industry terms used by investors and financial services' analysts. Certain of these non-GAAP measures are key inputs into Zions' management compensation and are used in strategic goals that have been and may continue to be articulated to investors. Therefore, the use of such non-GAAP measures, are believed by management to be of substantial interest to the consumers of these financial disclosures and are used prominently throughout the disclosures. A full reconciliation of the difference between such measures and GAAP financials is provided within the published documents, and participants are encouraged to carefully review this reconciliation. We intend to limit the length of this call to one hour. During the question-and-answer session of the call, we ask you to limit your questions to one primary and one related follow-up question to enable other participants to ask questions. With that, I will now turn the time over to Harris Simmons.

Thank you, James. And we welcome all of you to our call today to talk about our fourth quarter and full year results. I am going to go through a few of the slides, beginning with the deck we’ve provided to you. On slide three are some highlights for the quarter. At a high level, we were really pleased with the performance of both quarter and the year. We established some very specific financial targets back in early 2015 that included some goals for 2017. We achieved those goals and today the Company is substantially more profitable. We eliminated considerable amount of inefficiency, and we've transformed a lot of our operations to be simpler and easier for both our employees and customers. But we are not finished. Our culture of identifying ways to simplify and streamline is firmly established around the company, and we plan to deliver continuous improvement in operational and financial efficiency in quarters and years to come, while investing in areas that we expect should result in a healthy rate of revenue and earnings growth. Looking specifically at the quarter, we experienced continued strong growth in earnings per share, up about 33% from the year ago period, if adjusted to exclude a couple of items that were directly related to the change in the federal tax law. We were pleased with loan growth, which increased 5% over the year ago period, which compares to about 2.2% for large domestic commercial banks. We were able to push the efficiency ratio down to 61.6%. But is excluding the larger charitable contribution that we detail on slide three, it would have been actually just under 60% for the quarter. For the full year, efficiency ratio was 61.7%. Again, is excluding the larger charitable contribution and the expense associated with the…

Thank you, Harris, and good evening, everyone. I'll begin on slide eight. For the fourth quarter of 2017, Zions reported net earnings applicable to common shareholders of $114 million or $0.54 per diluted share. Here is detail of the couple of key items, so I won’t repeat them here. I will add that we are pleased with the financial performance of 2017, and note that we've successfully delivered on our financial commitment made to you on June 1, 2015. Let me make a few comments about revenue. Nearly 80% of our revenue comes from net interest income. Slide nine depicts the recent trend in net interest income, which continue to demonstrate substantial growth in the fourth quarter relative to the prior year period. Net interest income increased $46 million or nearly 10%. Interest income increased approximately $60 million, of which approximately two-thirds came from loans and one-third resulted from the investment portfolio. With respect to revenue drivers, I'll discuss earning asset volume first then transition to rates. Although, we don't have a slide on this, as we discussed in the recent past, we do not expect investment portfolio growth, which has been a meaningful contributor to pre-provision net revenue growth over the past several years to contribute significantly to growth in net interest income. The investment portfolio has now grown to the appropriate size relative to the size of our balance sheet. Slide 10 is a graphical representation of our loan growth by type relative to the year ago period. The size of the circles represent the relative size of the loan portfolios and the circles are ordered by size, left to right, from smallest to largest portfolios respectively. Total loan growth, including the effects of the declining oil and gas portfolio and the national real estate loan portfolio, was…

[Operator Instructions] Our first question comes from the line of Kevin Barker, Piper Jaffray. Your question please.

You made a quick comment about the securities yield bouncing back higher. Could you walk through that again and some of the reasons why you're starting to see securities yields go back up given we saw quite a bit of decline in the fourth quarter?

The decline in the fourth quarter was really related to prepayments we're experiencing on our SBA securities. And as noted in my prepared remarks and as you know, those have a relatively high premium attached to them. So relatively minor changes in prepayments can lead to, I will say relative to the other types of securities, disproportionate changes in yield. So all other things equal, the point that I was trying to make was that the securities that we're buying today actually have a higher yield than the securities that are coming off. And so over time, my point was again with similar duration and extension risk kind of characteristics, the yield on the securities that we're buying today have a higher yield than the yield the securities are coming off. And so therefore over time, again all other things equal, we would expect the securities portfolio yield to creep up over time.

And then also in your guidance for fee income, I noticed you're seeing slightly increasing for customer facing fees. Now, fee income as a whole, has been growing at roughly a 5% clip over the last couple of years. Was there a reason why you're seeing maybe a slight decline there? Or is it just related to the customer fees, in particular.

Well, the item there was really related to core fees. And as I tried to say in my prepared comments, the fourth quarter came in pretty strong. And so because specifically that page is a fourth quarter to fourth quarter view, that's really I think what that comment reflects. I will say over time, we are clearly continued to target mid single digit growth in our core fee income.

Thank you. Our next question comes from the line of Steve Moss of B. Riley. Your line is open.

I was wondering, you just discussed that commercial real estate growth we saw this quarter. Where are you seeing that from here?

Could you repeat that?

Commercial real estate growth this quarter…

Where you see it going from here you're saying?

Where you seeing it from here, where are you seeing those sources of growth and where do you know -- or should we expect similar trends in the future here?

This is Scott McLean. I would just say that the portfolio, commercial real estate portfolio in general last year declined as you can see. But we did start to see a pick-up in the fourth quarter and we anticipate growth that should be consistent with the rest of the portfolio throughout 2018. And really we're seeing it across the franchise. And it’s predominantly CRE term as opposed to construction, which is consistent with the mix of our portfolio currently.

And if we were to get another rate hike in March, what would you expect the benefit to the margins to be?

Well, we provide a lot of disclosures around this. So that I can't answer that so that I don't have to answer that question directly, because the answer is because of the effect on the margin is dependent somewhat on also the shape of the curve. And so you can see on the slides that I referenced -- we’ve got about, if I remember right, 40% of our loans in the near term are impacted by the change in rate. Obviously, changes in deposit rates are going to be heavily influenced on the change in the net interest margin. So all that together net-net, you're looking at probably a couple of basis points improvement in the margin.

Thank you. Our next question comes from the line of Brad Milsaps of Sandler O'Neill. Your line is open.

Harris, I was just curious in 2015 you guys laid out the multiyear efficiency goals, and now it's kind of the primary targets for management and kind of how your incentives are structured. Just kind of curious obviously you still have those efficiency targets out there in the out years [indiscernible], what else is kind of the big driver for you guys? And as a follow-up to that, you've commented in the past that given where rates have been and the amount of capital banks that had have to hold maybe the old measures of returns for banks shouldn't apply anymore. Just kind of curious now what you might be thinking about kind of returns for the industry you guys are now above 1% ROA, still have a lot of capital, but just any additional color in that regard would be helpful?

Sure. Well, I think in terms of the kind of measures that we're going to be looking at, and I think when we -- if you go back two to three years ago, we -- it was important to focus on something like efficiency ratio. We were way out of the middle to third way in terms of where we should have been probably in -- we've made a lot of progress as we've demonstrated in – we’ve shown some of the slides here. I think as we get little closer to where the industry is, our focus internally is very much on continuing to work at reducing costs, making -- really making everything we do as efficient as we possibly can. I expect that in terms of the efficiency ratio, we will in 2018 see incremental improvement over 2017. It will be at a slower pace as you can -- the obvious. We can't continue the same kind of trend that we earlier -- the same of pace of improvement, but we'll see further improvement. I am quite confident. And internally I think our focus is shifting more towards, how can we grow pretax pre-provision net revenue, which I expect that growth rate to be in the high single digits, somewhere thereabouts. And it's a focus on operating leverage and growth of PPNR, and we're working on a lot of internal initiatives that I think will help us continue the trajectory that we've been on. And again not at same pace we – there was a lot of low hanging fruit and that becomes tougher as time goes on, but there's still a lot of opportunity. As far as capital goes, as Paul mentioned, we've continued to ramp up the payout. And when we announced the merger -- our…

Thank you. Our next question comes from the line of Ken Usdin of Jefferies. Your line is open.

Paul, I was just wondering if you can elaborate a little bit more on the drivers of expense growth. First I guess how would you define low single, you help us kind of understand the ranges for the mid you were talking about, but in terms of off of that 16 to 28 days? How would you just help us understand what you consider low single?

Ken, we are publicly not super specific there; however, if you and kind of open up the Zions Bancorp or another story, you can see the last year we used a similar return where we are talking about slightly increase and you may recall that expenses increased kind of depending higher measuring it kind of 2% to 3% once you factor in that charitable contribution we discussed. So Ken I'd say it's kind of the net ballpark hopefully that's helpful.

Yes, and in that 2% to 3% issuing a ballpark. I guess how are you weighing just ongoing programs in terms of the tax spend and then anything incremental on top of what you did in the fourth quarter? And do you have any thought about do you accelerate some of the tech projects? Or do you just keep everything on that long-term seven year plan than you’ve had it on for a long while?

Ken, it's Scott McLean. Let me respond to that part of it. When you look at the expense growth which Paul has just described qualitatively, you described a bit more quantitatively. We -- there are lot of moving parts, we are finding ways to save money all the time based on our simplification initiatives and Harris described, but clearly employment cost is primary driver of the number. And I would just say that we are adding bankers and growth areas particularly number of our strong fee income areas like municipal finance, mortgage, wealth and just to mention a few. So, we are adding bankers in our faster growing and fee income areas and we are adding just basic commercial bankers and small business bankers across the franchise so that would be the primary driver there and then the secondary driver would be on a technology cost as you noted and our future core project the replacement of our long systems it's very long system, our three long systems and two deposit systems. It's just one of numerous technology projects its probably been the one we talked about most but we're quite spending 20% to 25% of our tax spend this year on advancing our digital capabilities and so there is technology in general is a fundamental driver of the expense number as well. And I would say the comparative 5 or 6 years ago, the investments we're making on the technology side are much more offensive and forward leaning, we're five to six years ago there were much more defensive just trying to keep the shop running appropriately.

Thank you. And our next question comes from Marty Mosby of Vining Sparks. Your line is open.

Paul, wanted to ask you about how -- when you look at that by 20, dilutive impact of the warrant, it looks like you kind curve into there is may be diminishing increase as the stock price goes higher. And over the last year share count even though you accelerated share repurchase over last two quarters is still going up because of the impact of these warrants. Is that the goal and expectation that that share count can start now that go down as the impact from higher stock prices becomes a little less?

Well, I know your first point you got a very sharp eye Marty although I would say that that curve is probably not overly pronounced. I would describe there is more linear then curve but it is slightly curved. So as I said in my prepared remarks depending upon the kind of continued reaction of our share price to again some pretty significantly improved fundamentals you have over the last couple of years. All other things equal obviously, if the share price doesn’t move from here then we would expect the share repurchases to have much more direct impact on diluted shares outstanding. It's just what we have been experiencing off course is a share price increase that has been -- that is exceeded our ability under our capital plan to go out and buy back stock.

And then the other thing that’s really just much more of a suggestion as we -- you were highlighting Investor Day coming up here shortly. That with the technology spend that you're talked about, there has been such a significant project. They've really been able to talk about because you don’t see those expenses in the short run, they really get capitalized and then they kind run out overtime. But to really kind outline, one, what are the benefits that you're beginning to see and how that they start to really kick in? And then two how much we kind behind the scene capitalizing eventually is going to start amortize as the systems going to play?

Marty, it's Scott. It’s a great point and we do plan on focusing on that as well as our simplification initiatives is well on Investor Day. Thanks to many subjects we will talk about.

Thank you. Our next question comes from the line of Geoffrey Elliott of Autonomous Research. Your line is open.

The decision to move away from the holding company structure to something simpler, could you talk a bit about how you made that decision and in particular on timing why announced when there is a legislative process underway that could result in significantly reduced regulation one a way until you see the outcome of that and then decided dropping the whole curve as the bank think to do?

Sure. I would say that the process began about a year and a half ago, and as we were made the decision to consolidate the various charters that we had -- we had I think we call seven different banking subsidiaries and that required a holding company. Once we consolidated the charters I guess I sort of asking myself the question in the name of simplifying life. I ask myself what was the benefit in having a bank holding company. And particularly as we look at our presence and perspective mix of businesses and operations, what can be done in a bank? What can’t be done in a bank? And frankly, virtually everything we're doing operationally in terms of business lines of business can be done in a bank. Now in times past there were some things that you could do some of which are now prohibited by the Walter rule for example and also we've been winding down some of those investments and but you know the likelihood that we're going to find ourselves underwriting the equities and we're engaging in merchant banking and you know there's a domestic commercial bank. There's precious little in my view that you can really do with a holding company that you can't do in a bank, and that small set of things that you can do in a holding company are probably best left to very-very large companies. And so that was the mindset as we set about investigating the opportunity, I can that I probably spent more time working on this legislation than any banker in America and so I mean I talked to a lots of Congressmen I think I know business landscape pretty well. And I'm highly in favor of the legislation and I think that I hoped that the Crapo bill will pass. But it's sort of dawn on us that it couldn't deliver one thing that merging a holding company into the bank could deliver and that was eliminating duplicate regulator altogether so the Crapo bill, they set the threshold at $250 billion will certainly be helpful to a lot of banks in terms of you know being subject to the Fed's stress test their models etc, but should still have in our case the OCC and the federal reserve coming in and performing examinations. And I think most anyway you cut it, we said there's a lot of overlap in what they're doing and so that's fundamentally where we said we think that this is ultimately what the you know the right thing to do because it will give us good supervision, regulation, but it won't give us duplicate regulation every time we turnaround, which we've been seeing increasingly in recent years. So, that's fundamentally the reason behind it.

Thank you. Our next question comes from the line of Steven Alexopoulos of JP Morgan. Your question please.

I'd like to start regarding the corporate tax rate coming down for your commercial customers. I'd imagine that as cash flows improve on a net basis, you might see upgrades and the need for reserve. I'd love to hear your thoughts on this, and if that could have a material impact on credit quality?

Yes, the jury out on that, obviously, and there's also speculation among some of our -- some of the larger borrowers in the economy which as you know we don't generally lend to our clients particularly on the commercial side are some kind of small business and smaller and middle markets. There's some of those may take extra cash either coming from offshore otherwise to use that to pay down debt. I am not personally -- I don't think we're expecting a big effect of that on our core client base, nor are we expecting because again our clients look different than the much larger clients, nor are we expecting a material change in the credit quality. Although there's a lot yet to be seen I think as the effect of the tax legislation shakes through the economy.

Then an unrelated question on C&I loan growth, Zions Bank saw a $200 million decline quarter-over-quarter but you had nice growth in CB&T. Can you give a little color on each of those?

Yes, there was a lot of activity at quarter end and I just -- in fact I don't have the details. I don't know that we could give you that color at the moment. We may be able to at our Investor Day give you a little more insight.

Steven, this is James, I'll just jump in with a little bit though as it, there've been some loans that have been maturing or being rebooked as they mature from some of our large scale part utility type of deals that are being rebooked in the geographies in which they exist. So, historically for example some alternative energy lending and types of things have been booked within Utah Bank. And that those some of that's being moved to California where it is actually based geographically but -- so there would be some of it.

There would be a piece of it, but not a great big piece in the fourth quarter.

Thank you. Our next question comes from Ken Zerbe of Morgan Stanley. Your line is open.

Just going back to the efficiency ratio. In the press release, you mentioned the 60% for 2019 as well. Can you just give us a little background -- just remind us, is there any fundamental reason why your efficiency ratio should be sustainably higher than a lot of the other sort of similar sized peers, because a lot of the banks of around your size are coming out with target somewhere like the mid -- call it mid to low 50s give or take just as a technology piece? Does it go down after all of your the future core spending slows? Just trying to understand the farther long term look?

I guess I -- listen I'd say that, it's hard to speak to where they think they are going to get that kind of additional boost to get some down and to the low 50. So I think as we look at the peer group, which we measure I think which we measure our progress, we're getting to a point where we are closing in on sort of the median. We are at 61.6% for 2017 going into 2018, there are couple of headwinds as noted the lower tax benefit on the legacy municipal, securities and loans portfolio combined with that the bonuses and salary growth that we announced about the end of the year combines throughout 90 basis points that's about 90 basis points of efficiency ratio. So that's some out of the headwind and we think despite that we're going to get a challenge to somewhere closer to 60 basis points. And I guess it gets incrementally more difficult but I think we get down I think very much within the kind of at least the middle of the pack it's not better overtime than our peer group. I do think but there are couple of things that our headwinds one is the technology stand that we've talked about that's about $35 million roughly going through the income statement annually on replacing core systems off course as Scott mentioned were also spending money on digital etcetera. The other is that we have a the profile of our commercial loan portfolio is decidedly different from a lot of our peers it is smaller to the medium size of any commercial loan here is decidedly smaller than what you would see in the most of our peers and that's a little more expensive model I think to run but I think it also produces some benefits in terms of that kind of deposit base and we have and traditionally the kinds of loan yields that at the end we will achieve. So I don’t know exactly how to measure that against peers, but I think that's probably a factor. But I think nevertheless we're going to find ourselves very close to where peers are already here within the next 24 months.

If I can just jump in there Ken, I've just as of Friday the peer consensus efficiency ratio for 2019 was about 58.5% so were our goals are not substantially different from that I would tell you and that's consistent with what Harris just said. The top cortile is about 57% so there is not a huge range between the peer groups that we said is planned today.

And just to continue within that topic I know that couple of other things one is the effective tax while change is going to be about a 90% and that was 90 basis points increase in our efficiency ratio that's number one. And then you refer back to the press release which is Page 4 where we talk about inefficiency ratio that kind of near is 60%. I would note that could be higher or lower and so I would ask you to keep that in mind also and reference to what just what James just said kind of peer group relative. And it sounds like the peers I think have not been doing necessarily a near-term, but more of our medium and longer term efficiency ratio outlook and just to be really clear that’s not what we provided here. What we're trying to express is that to a continued growth and pro provision of that revenue our efficiency ratio is going to continue to decline and improve.

And just as a follow up. After you really -- your slide deck on provision expense obviously has negative this quarter. The way of it reads I know you say modest there, but is it possible you could have either quarter or several quarters where between further oil and gas reserve release and Hurricane Harvey again, you could actually have sort of persistently negative provision at least for some short period during the year?

This is Paul. I would say as frankly its possible, as we said, as we noted here there may be some releases as credit quality continues to improve and we had seen a fairly long line of continued credit quality improvement and charge offs would have been very good until we provide incremental growth, to the extent we have charge offs even that recoveries in some cases that’s absolutely possible.

Okay thank you.

And so this is James. We're at the end of about an hour, so we do have few questions to go so its lighting round variety here and we will just pick one primary question and one. Thanks.

Thanks. So the next question comes from Emlen Harmon of JMP Securities. Your line is open.

More I've got queued for you as a couple of parts, so we can do a quick follow up from that. Just in terms of bringing the money market balances on to the balance sheet, how much of that do you plan to relay to drive deposit growth and just what's the potential impact on deposit yields?

Well, we haven't been very specific about that and it is identified as an opportunity. And we expected to be a significant part of our funding strategy over the course of next several quarters, as we said. But we now had provided specifics with respect to how that may affect over our yields, though I would say, I mean you can kind look at our wholesale borrowings and what is yield is on that, you can see that I think Page 17 in the press release and recognize that we would be bringing these on at a rate which is better than where we borrowing in the wholesale market.

Next question comes from John Pancari of Evercore. Your line is open.

On the tax benefit just wanted to get your thought on how much of this benefit is likely to accrete to the bottom line and stay there? Or how much would you say that you're putting back in the business or ultimately going to get more competitive with?

I'll take a stab otherwise. I find myself thinking about pretty much like deposit basis I guess. Whole like you can go on to, we're not deliberately going out and using it to try and buy market share. I think overtime the way markets work is that, it will -- a major portion of it probably dissipate end of way. But I think that will take a little bit of time. And so I think will capture most of that benefit 2018 incrementally less as we go along its markets just. This is one of these high class problems that corporate America haven't have the rest of which for very long-time so.

The next question comes from Dave Rochester of Deutsche Bank. Your line is open.

Just one quick one on expenses. I know you guys mentioned giving some more detail later on the simplification effort. But can you just give an update on whether you still see that as a multiyear opportunity to control expense growth? And are you expecting any rate sensitivity in that expense growth guidance, meaning, if we were to see a bunch of rate hikes? Could that possibly allow for some expense growth for you?

Dave, this is Scott McLean. I just think as we talk more at the Investor Day about the, what simplification is look like in our company. I happen to believe that the -- we're just getting started, we made a lot of really good progress in big areas, but we have a lot of other areas and now there's a lot of energy around this subject has been. And I think we're getting more effective in executing more quickly on creating change, and everyone of those simplification processes -- in many cases, it reduces cost but in some cases it increases revenue, certainly has an impact on customer satisfaction and employee satisfaction. So I think as we talk more about that story and tell that story more appropriately I think you'll -- think most investors will be encouraged by it.

Great. Thanks and then.

I'm sorry you mentioned the expense growth -- sorry, you know we would have to see really solid core revenue growth coming from things other than just interest rate changes. I think we're driven by a loan deposit pre-income growth, as long as those fundamentals are increasing we'll probably lean into those businesses and in terms of supporting people and technologies. But just getting increased rate benefit I think we'll be very conscious of not spending that away inappropriately.

Next question comes from Chris Spahr of Wells Fargo Securities. Your line is open.

My question is regard to your fee income and this seems to be one of the best core fee income numbers that you put up and I guess in the history of the firm, at least you've been a customer related fee income yet your guidance for next year really hasn't changed that much, and almost implied like a lower level of run rate that you posted in the fourth quarter. So what happened in the fourth quarter that was better than expected? And what can you do to kind of kick start fee income to kind of at least change your outlook on that line?

Sure, thank you. This is Scott. This is where quarter-over-quarter comparisons to get a little out of whack. We felt great about the fourth quarter of this year versus the fourth quarter of last year, but it's really 12 months run rates as we look at and that mid single digit growth rate is what we're still guiding to. But this fourth quarter versus fourth quarter of '16, we just saw you know really strong numbers in those two quarterly comparisons related to our normal workhorse fee income categories like treasury management, bank card. But we saw some really unusual increases in municipal finance, foreign exchange and a number of others that our wealth business that just happened to have really strong 4Q versus 4Q comparisons. Having said all that, I think if we can put up 5% mid single digit growth rate numbers in fee income, these are very basic products. We are not selling investment banking or exotic capital markets activities, and so these are generally businesses that grow kind of mid single digit growth rates.

Thank you. At this time, I'd like to turn the call back over to Mr. Abbott for any closing remarks. Sir?

Thank you very much. Appreciate that, everyone joining the call today. We -- as it's been mentioned a couple of times in the call today, we do have an Investor Day coming up on March 1st. It is mentioned on Page 7 of the earnings release. The event is expected to begin at 8 AM Mountain Time, 10 AM Eastern Time. We expect the event to run for several hours, and we'll be webcasting that, although we'd be delighted, if you'd join us in person, sounds more enjoyable. And so please contact investor@zionsbancorp.com or myself directly, or via the phone numbers listed in press release. Thank you so much for joining us for the call today. And please -- we look forward to seeing you in March if possible or at our next earnings call, next quarter. Thanks so much.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.